Financial instability curb spending and consumers turn to credit

Two in five consumers expect to be unable to pay their current bills and loans in full.

In Hong Kong, 44% of consumers are optimistic about their household finances over the next 12 months for Q2 2024, down 18% year-on-year (YoY) TransUnion reported.

Two in five consumers expect to be unable to pay their current bills and loans in full, up 3 percentage points (pp) from Q2 2023, with Gen Z making up 23% of this group.

In the next six months, 60% of Hong Kong consumers are worried about inflation in everyday goods such as groceries and gas, 57% about a possible recession, and 53% about job security.

Due to these economic challenges, consumers are taking a more cautious approach to their financial management with 41% expecting a decline in large purchases for appliances and cars over the next three months.

In addition, 37% expected further decreases in discretionary spending, and 36% anticipated a drop in online and in-store retail purchases.

Amidst the risk of financial instability, the appetite for new credit or refinancing existing credit has grown, with interest highest amongst Gen Z (36%), followed by Millennials (35%), Gen X (28%), and Baby Boomers (17%).

Amongst those planning new credit activities, 49% intended to apply for a new credit card, 30% for a personal loan, and 28% for a limit increase on an existing card.

Meanwhile, self-reported super prime consumers planning to apply for new credit dropped to 29%, down five pp from last quarter, while prime (59%) and near prime (50%) consumers saw YoY increases of 27 and 14 pp, respectively from Q2 2023.

Of those who were considering new credit, 28% abandoned plans to apply this quarter, citing high costs (32%) and burdensome application processes (27%) as primary reasons.

Online transactions have also become significant to Hong Kong consumers with 50% conducting at least a quarter of all transactions online and 16% conducting more than half in Q2 2024.

Consequently, fraud awareness has risen significantly, with 38% of those targeted by fraud not falling victim, an increase of 5 pp from 2023. There has also been a 4% decrease in those unaware of any fraud schemes targeting them, dropping to 56% in the last three months.

Concerns over personal information sharing increased to 68%, driven by worries about identity theft (72%), privacy invasion (58%), and receiving unsolicited marketing communications (47%).

TransUnion surveyed 853 consumers in Hong Kong between 1–13 May 2024 on their shifting consumer attitudes and behaviours based on the dynamics of income, debt, and identity theft.